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Home affordability declined in September as stress test hit new high

September home affordability report

Increasingly high interest rates continued to erode Canadians’ ability to buy a home in September, despite the fact that home prices softened in every major market across the country.

According to the latest data from, home affordability contracted in each of the 10 cities studied between August and September. The analysis, which is based on monthly real estate data from the Canadian Real Estate Association, reflects just how much of an impact changing mortgage rates – and, by extension, the mortgage stress test – have on the overall income needed to purchase the average-priced home.

Fixed mortgage rates marched steadily higher on a monthly basis, as five-year bond yields hit fresh highs in the 4.4% range – a peak not seen since 2007. Meanwhile, the Bank of Canada’s Overnight Lending Rate remains at 5%, resulting in the prime rate in Canada sitting at 7.2%. Based on an average mortgage rate of 6.33%, many of today’s mortgage applicants are being stress tested at 8.3% or higher. While just 0.1% higher than when the study was conducted last month, that uptick was enough to decrease affordability for the average buyer in markets across Canada.

“The stress test is the highest it has ever been, exceeding the high water mark that was set last month,” says James Laird, Co-CEO of and President of CanWise mortgage lender.

“Home values dropped in all 10 cities we looked at, yet still became less affordable. August to September data highlights how impactful even a minor rate increase is on affordability.” September Affordability Report.

Data in the chart is based on a mortgage with 20% down payment, 25-year amortization, $4,000 annual property taxes and $150 monthly heating. Mortgage rates are the average of the Big Five Banks’ 5-year fixed rates in September 2023 and August 2023. Average home prices are from the CREA MLS® Home Price Index (HPI).

West coast buyers see income decline by largest margin

As has been the long-term trend, home buyers in Vancouver continue to require the largest increase in income in order to purchase a home; it rose by $3,900 month over month, despite the average home price declining by $5,100.

The City of Toronto, despite seeing the largest home price decrease of all 10 markets (down $14,400), came in fourth, with $1,800 in additional income required.

Deteriorating affordability was even apparent within the City of Hamilton, which has been resistant to growing income requirements in previous months. In September, however, the average income required grew by $1,640, despite home values dipping by -$9,500.

According to Laird, softening in market prices aren’t enough to counter today’s steep borrowing costs, with little relief on the horizon for home buyers until the Bank of Canada actively starts to cut rates.

“Home values are going to need to drop a lot more to offset the impact of the sharp rate increases,” he says.

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